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Key Year

The second complete year of the government of Andrés Manuel López Obrador commences, a year in which his project and strategies begin to bear fruits. That sown in his first year (in reality, given the circumstances, a year and a half) must yield results. But above all, from now on there is no way to blame the past, as in “they left us a mess.” The country, thus the responsibility for it, lies firmly in the hands of the President.

By now two things are undoubtable: first, the President’s central project –political control- has advanced relentlessly. Second, the economy exhibits severe affectations. The effect of this is manifested in diverse forms, but two sum up the dilemma: on the one hand, there is no private investment (and very little by the public sector), and on the other, tax revenues are ebbing inexorably. The latter is explained in good measure by the lack of growth of the economy, but its impact on public expenditure is dramatic, largely due to the government’s obligations in matters such as retirees’ pensions, which increase systematically, minimizing the so-called “fiscal space,” that is, the amount available for the government to direct toward its programs. In addition to this, the decision of the government to use its increasingly scarce resources to PEMEX reduces its expenditure options to an even greater extent.

Truth to tell, the issue of attracting private investment did not begin with this government. Investment practically disappeared from the time of the Trump campaign with his threat of cancelling NAFTA. That fact, which preceded by far the election of President López Obrador, is an obvious indicator of what prods or inhibits private investment, domestic as well as foreign. What NAFTA supplied was certainty regarding the rules of the game, with respect to what the government had committed itself to in terms of attracting investment. Trump brought investment to a halt and this has not been resolved since because the new USMCA eliminates the nodal source of certainty that was the heart of NAFTA, as well as because the current government displays a thorough lack of understanding (or refuses to accept) of what is required to attract private investment. Its insistence that economic decisions should be subordinated to political decisions evidences a thoroughgoing ignorance of the nature of the XXI century.

The question is whether, in the face of the risk that the economy will remain stagnant or of a recession, the government will be willing to review its premises and correct its course. From my point of view, the AMLO government has a better and greater opportunity historically speaking for confronting the problems that decades of reforms (the majority benign and necessary) were not resolved. The opportunity derives from two circumstances: first, the enormous legitimacy that it possesses and, second, the fact that the priorities that it marked long ago -corruption, poverty, regional inequality and lack of growth- are the national ones.

The economy has grown little on average for a long time due to decidedly explainable reasons. In the first place, in that there has not been greater investment in infrastructure in the South; in the second place, because there are powerful economic, political and/or union interests in the regions that do not grow that impede the development of new investment projects; in the third place, because innumerable regulations and practices promote the growth of the informal economy (which entails limits to its growth due to lack of access to credit and does not contribute to the tax pool) and, in the end, but perhaps summing up everything, because the country is characterized by permanent extortion: inspectors extort the citizens and entrepreneurs, union leaders extort the workers, politicians extort the population, the narcos extort the government and the society in general. NAFTA did not eliminate extortion, but it did create conditions for it to be controlled in its space. The rest of the country lives under permanent extortion.

The agenda of changes that the country requires is not difficult to identify and it is all absolutely compatible with the priorities the President earmarked a long time ago as well as with his political base. In fact, if one observes the (incomplete) list in the previous paragraph, the big losers are always citizens who are small business owners, informal businesses, etc., who are not covered by the protection like the one NAFTA provides. Still worse, the South has fared worst of all, because local unions and politicians extort the population and deny them growth and development opportunities because this would imply altering the local status quo. Were one to evaluate where the regions of greatest poverty and inequity are found, their correlation with these evils is patent.

This incipient year comprises the great -and perhaps last- opportunity for the government to devote itself to attending to the cause of the ills the country suffers from and that, as mentioned previously, are precisely those that the President hand-picked as the axis of his campaign and his agenda. What has not worked to date constitutes a unique opportunity to advance this year. Given Mexico’s six-year term-of-office cycle, what is not done now will not done at all.